“MELIÁ CASTELO BRANCO OCCUPANCY HAS EXCEEDED 70% IN AUGUST, THUS SHOWING HOW THE MARKET HAS RESPONDED TO THE REHABILITATION OF THE HOTEL”
It was a year ago when Hotel Tryp Colina do Castelo, located in the Portuguese city of Castelo Branco, changed its name and its visual and joined the Meliá brand. The full rebranding of this 26-year-old hotel gave rise to Hotel Meliá Castelo Branco, which features 103 guestrooms, meeting rooms with capacity for 350 people, a restaurant, and a new leisure space with spa, massage rooms, indoor swimming-pool, hot-tub, and fitness centre.
The visual change had an impact on the operation and the four-star hotel has stood out in the Hoti Hotéis portfolio.
“Meliá Ria, Star inn Peniche, and Meliá Castelo Branco were our best-performing hotels during the summer. In the specific case of this hotel, the occupancy rate exceeded 70% in August, thus showing how the market has responded to the hotel rehabilitation”, according to Miguel Proença, in an interview to Publituris Hotelaria, on the occasion of the first anniversary of the hotel rebranding.
The CEO of Hoti Hotéis has also stated that, nevertheless, the Group will post, in its overall portfolio, total revenue shortfalls between 65% and 67%, following a year marked by a pandemic that forced the shutdown of hotels and resulted in a huge drop in guests in the hotel sector.
Meliá Castelo Branco underwent a rebranding last year. How has this new image impacted the operation?
The rehabilitation that enabled the hotel to be integrated in the Meliá Hotels & Resorts brand was meant to pay tribute to the region, by using many modernised regional elements, so that the hotel “belongs” to the region. Among the reasons for people to stay at the hotel, we considered the visit to the surroundings as the major factor, followed, of course, by the creation of a quality environment, now capable of including leisure guests, in addition to the business segment, which already was its main market.
With this programme, at a time where willingness to search for less populated areas was evident, the odds to market the hotel have grown significantly, thus increasing the reasons to travel to Castelo Branco. We have seen this potential being achieved and, even as we go through such difficult times as this, we have realised that the hotel is being increasingly sought-after by much more diverse market segments where, up until now, the Spanish market has the greatest weight.
What is the profile of the hotel guests?
During the week, the business segment provides most of our guests, with greater emphasis on the corporate segment. The rehabilitation is supposed to bring leisure clients, who wish to explore the cultural richness and the nature of the region, as well as enjoy the hotel’s leisure facilities. These features help to strengthen occupancy on weekends and holiday periods, namely in the summer and Easter. As a matter of fact, the Hotel is now having a major share of leisure tourists that choose our hotel to rest and recover energy.
Traditionally, the Portuguese market is clearly dominant, accounting for more than 70% of the market share, followed by Spain, with 10%. The remaining European countries make up most of the total share. The end of 2019 and 2020 has already seen an increase in the importance of the Spanish market, which shows the wide recognition of Meliá in Spain.
What were the leading indicators in 2019?
The rehabilitation that was undertaken was aimed at ensuring competitiveness in other segments of the market, therefore, more occupancy, with greater quality perception, therefore, higher average price. Despite the impact caused by the works, which were complete at the end of the year, we closed the previous year with an available occupancy above 60% and an average price of 58€ (REVPAR of 35€), which are well above those of 2017, with a REVPAR of 30€. These figures, in a year where works were taking place, made us realise that we took the right decisions and that there is high potential growth in normal market times.
One of the slices contributing the most to the Meliá Castelo Branco operation is the corporate segment. How have you adapted the supply to the current situation?
The current situation is cause of deep concern for the professional segments for the time being, but also on a longer-term basis, as people have to get used to the technological means to hold meetings, conferences and part of the business contacts. Aware of these challenges, Grupo Hoti Hoteis has been implementing strict and demanding hygiene and safety measures and ensuring their international certification. Within this framework, hotels within Grupo Hoti Hoteis, under franchise agreement of the Meliá Hotels International brands, have joined (besides the “Clean & Safe” certification) the “Stay Safe with Meliá” programme, which is certified by Bureau Veritas. Meliá Castelo Branco is at the final stage in the certification of this programme, which required a cross-sectional process to adapt the Hotel’s procedures and facilities, in order to ensure the utmost safety of guests and staff.
On the other hand, the hotel has launched a set of products specifically designed to meet the massive challenges created by the pandemic, such as the “Day Work” and “Residence” products, which can be enjoyed by both leisure and business tourists that wish to isolate themselves for one or more days. We also provide a Meeting Package, which offers exclusive conditions for companies to meet with their partners in a safe, quiet, and fully sanitised environment, in compliance with all the measures set forth by Portugal’s Directorate-General for Health (DGS). It comprises a meeting room, 1 coffee Break, a buffet lunch, flipchart, data show and free Wi-Fi, at a very competitive price.
The hotel is also in high demand for events such as weddings/christenings.
How many cancellations did you have this year and how have they impacted the operation?
We had many cancellations and losses this year, but we are slowly recovering. The human resource management logistics was and still is a challenge.
Have the events already been rescheduled for the next year?
Currently, uncertainty prevails, therefore, under these circumstances, clients do not make reservations, and are adjourning them in some cases or even cancelling them, until a future time when they feel safer.
How have you sustained the operation during the pandemic months?
The location, the brand and the type of product ensuing from the rehabilitation have enabled Meliá Castelo Branco to be one of the least impacted hotels at the Group level, even though we are always talking about significant losses.
According to our estimates, the year of 2020 will end with drops in turnover of around 38%-40%, while Hoti Hoteis is set to end the year with overall revenue losses of 65%-67%. Still, there were periods where occupancy was quite good, as was the case in the summer.
Over the last few months, the operation of the Group’s hotels, and that of Meliá Castelo Branco, went through successive stages of adaptation. First, the sudden closure in April, followed by the implementation of procedures to get the “Clean & Safe” seal.
The measures taken by the government allowed to consider reopening with minimum services. Therefore, when the corporate market started to generate minimum levels of demand in June, we reopened the hotels across the Group. This process was carried-out together with a set of measures meant to minimise the risk of contagion, minimise the operation costs and maximise the commercial visibility. This way, it was possible to ensure that the hotels in operation would lose less resources than if they were kept closed.
July, August and September saw some recovery (although significant values were only posted in August). During this period, we started to implement the “Stay Safe with Meliá” programme, which is intended to increase the safety perception of our guests, now present in greater numbers.
As we got to mid-October, and aware of the growing occupancy falls, we started to plan new temporary closures, albeit less widely now and with the possibility to occasionally reopen some hotels, depending on the occasional demand peaks. And this is how we will continue to operate until early 2021.
How did the summer period turn out?
It was obvious that the Summer of 2020 in the hospitality sector relied heavily on the Portuguese market, which noticeably looked for more discrete locations. The changes we introduced, and which served as the basis for the brand change, were timely as they highlighted the potential of the hotel to serve the leisure segments with quality. For this reason, Meliá Ria, Star inn Peniche and Meliá Castelo Branco were our best-performing hotels during the summer. In the specific case of this hotel, we exceeded 70% of the occupancy rate in August, which shows how the market has responded to the rehabilitation of the hotel. However, we must also stress that, although this hotel was one of the least impacted in 2020, this month was an isolated case. As a matter of fact, outside this peak period, the weakness in hotel demand in the remaining months, those preceding and those following, was evident.
What were the greatest changes implemented at the hotel?
The biggest investment made at the hotel was on hygiene and safety certifications, such as the “Clean & Safe” seal from Turismo de Portugal. We are currently in the process of completing the audits for the “Stay Safe With Meliá” programme, certified by Bureau Veritas, which attests to a high level of commitment and investment on our part, from training on human resources to investment on hygiene products, signage, etc.. We are also developing an application for guests, which is intended to reduce the handling of menus and other communication supports that are traditionally on paper format (although these ones are already in QR code). Alongside the implementation of the entire programme on proceedings and equipment, we are making the necessary adaptations to introduce new extended-stay products, i.e., the “Day Work” and the “Residence”.
As far as cancelled services are concerned, that decision was taken in June, but most of them resumed as of mid-July. The responsiveness of demand started to be associated to the leisure segment and, for this market, it is necessary to ensure a more complete catering service, as well as the running of the swimming-pool and fitness centres, even if it is only for guests. Meliá Castelo Branco will continue to work in this fashion until January.
What other strategies have you set up to face the foreseeable future?
We are actively promoting – and intend to continue to do so – our hotel, and we are taking part in Meliá brand actions, such as promotions. We are also involved in “Talk” actions via zoom with travel agents, operators, etc.. We take advantage of our services, and make them known as well, in terms of virtual meetings.
We are also in the process of preparing campaigns and diversifying the Take-Away offer so that customers, who come to our restaurant regularly, may continue to enjoy those services, always in compliance with the DGS guidelines.
Aside from the commercial initiatives, the capacity to minimise operation losses is at stake in the next few months. To achieve this, it is crucial to focus on all management areas, and we must start with the follow-up of occupancy losses, as well as the definition of the time when occupancy levels are low enough so that losses are smaller with the hotel closed rather than open. In the next few months, this assessment will be permanent and, although we have now decided to close temporarily 6 out of the 17 hotels of the Group, this decision will change in accordance with the weekly developments. This decision will be dependent upon demand.
What are the prospects until the end of the year?
The planning of reservations cannot be made now more than one week/two weeks in advance for any of our hotels. The growing trend for last-minute reservations, that was establishing itself in the last years, is now the rule. Depending on the conditions of each location and the sales potential, we have decided that some hotels would be fully operational, such as Meliá Castelo Branco. In this case, services such as restaurant, bar, indoor swimming pool, health club, will remain open until the end of the year. We have been monitoring the development of the variable costs and the fixed costs and, to this end, we will keep in operation the hotels that have minimum levels of occupancy, thus allowing the reduction of operational losses.
What are the plans for the holiday season that is nearing?
We have developed Christmas and New Year’s Eve programmes for our guests with the utmost rigour, in order to comply with the DGS rules and minimise public gatherings and risks of contagion. These programmes are not fully closed and are being changed as deemed necessary. We are not promoting parties, but we want to continue providing the quality and the service that this season asks for, even if celebrations are going to be different this year. We are not going to lose hope in the future.
What are the greatest challenges ahead of you?
The current situation significantly shook the strong foundations of the tourist activity, as the perception of danger reduces the use of hotels to the minimum necessary.
The team is busy trying to mitigate risks of contagion, propose new product solutions, communicate in a more coordinated and intensive way, open and close operations selectively in order to minimise losses, and be vigilant with regard to the cash situation of each operation. All these measures are important, alongside the financial soundness that Hoti Hoteis has been consolidating over the last decade, to minimise operating losses and, thus, ensure the Group’s ability to survive. There is a whole new reality out there that requires a level of rigour, resilience, and proactivity on all areas of operation, it is a very comprehensive challenge that we have managed to go through with a great sense of cooperation. This is a time for the team to reveal itself, to support each other, regardless of our duties, and only in this way will we be able to overcome this situation that has shaken the whole world.
In the specific case of Meliá Castelo Branco, the location, the image recognition of the Meliá brand and the type of product that we managed to place on the market were crucial for a huge qualitative and quantitative leap which, at normal times, would be the key for success. Nevertheless, the specific characteristics of this crisis have driven Clients to appreciate the work developed, which has made it possible for this hotel to be one of the least affected ones within our portfolio. Still, all challenges facing the Group will also have to be faced by the Meliá Castelo Branco Team.